Price Sensitivity

Price Sensitivity

Price Sensitivity Jonathan Poland

Price sensitivity is a measure of how much the demand for a product or service decreases as the price increases. It can be seen as the drop in conversion rate as the price of a product or service goes up. The degree of price sensitivity varies greatly among different customers, with some individuals being more willing to pay higher prices than others. For example, businesses and governments may be willing to pay more for a product or service than individual consumers.

Pricing strategies often take price sensitivity into account by offering different prices to different customers based on factors that indicate their level of price sensitivity. For example, an airline may offer lower prices for tickets that require a Saturday night stay, as this is typically a signal that the customer is a business traveler who is less sensitive to price. This allows the airline to target their pricing more effectively and maximize their revenue.

Here are some examples of price sensitivity:

  1. Customers who are willing to pay a premium price for a high-quality product or service
  2. Customers who are shopping on a tight budget and are very sensitive to price increases
  3. Customers who are loyal to a particular brand and are less sensitive to price changes
  4. Customers who are willing to switch to a competitor’s product or service if the price is lower
  5. Customers who are willing to pay a higher price for convenience or time savings
  6. Customers who are price sensitive when it comes to purchasing necessities, but less sensitive when it comes to luxury items
  7. Customers who are price sensitive when it comes to products or services that they use frequently, but less sensitive when it comes to infrequently purchased items
  8. Customers who are price sensitive when it comes to products or services that have many substitute options available, but less sensitive when it comes to products or services with few substitutes.
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